ThomasGoodwin.com

On May 29th I posted a blog stating the local real estate market in Cincinnati and Dayton, Ohio had not seen the type of slowdown that many other parts of the country were seeing, or at least not to the same extent that other parts of the country were seeing. The following article was posted in the Cincinnati Enquirer newspaper’s online edition:

Home Not-so-Sweet Home?

This article, dated June 22nd, 2007, points out that “equity” in Greater Cincinnati and Northern Kentucky homes grew approximately 20% from 2000 to 2005.

My take on this is that even with a slowdown recently, most homeowners that have owned their homes for more than a year or two would still have some built-in market appreciation as equity if they went to sell their home now, despite the recent slowdown. The caveat to this is that those people would have to be willing to wait a little longer to find a buyer and these value changes assume that the property has been at the very least kept up, if not improved. People read about someone buying a house in 2000 or 1999 for $150,000 and getting $180,000 for it in 2005 need to remember that during that time period the owner may have done some work to it to keep the value on the upward movement… perhaps new carpeting or cabinets, added more storage space by building onto a garage or finishing the basement.

These reports that continually come out only discuss sale prices and do not reflect changes to consumer behavior. 10 to 12 years ago a new house being constructed probably would not be hard-wired for high-speed or wireless Internet connection unless it was a top of the line luxury home. Today, such “modern conveniences” are almost standard unless such tract housing is being built as rental property, and even then some nicer rental units come with these amenities standard. These added features have driven up construction costs along with increased costs of building materials following Hurricane Katrina in 2005 (and the storms that preceded it). With new homes costing more, existing homes in the same area are better able to compete and fetch more money than if construction costs had fallen and people could buy a new home for less than an exisiting home (or more likely pushing existing home prices downward with the decrease in construction costs).

I will continue to post updates on the local real estate market as I find them. One quick note about the picture above: this was taken by me as I was driving south on I-75/I-71 past downtown Cincinnati, Ohio. I was passing the Duke Energy Convention Center, which has a light display on the side spelling out the city name. Considering I took this myself while driving and I was able to get the city name and my face in the picture, I was quite impressed with myself and with how the picture turned out. It adds a nice touch to my blog about Cincinnati too I think!

As always, I welcome your feedback…

So you’re going into business (or you’ve gone into business) and like most small businesses you have a great deal of your personal wealth tied up in the success of your endeavor. Many entrepreneurs go into business with a great idea and a way to get the business up and running, but they often overlook details that are not related to their product or service or that don’t need to be taken care of in order to get the business started.

A good business plan will help serve as a road map for entrepreneurs when they face growing pains or when they decide it’s time to close up shop (i.e. an exit strategy). But what happens when two or more owners of a small business don’t agree on something? Or what happens when one person has more control than the other owner and acts in a manner that is good for his or her own personal benefit but to the detriment of the other owner or even the organization as a whole?!

When one owner that has more control acts in manner of self-interest to the detriment of the other owner or the entire organization, the concept of minority oppression comes into play. Minority oppression in a closely-held corporation is a topic that I have done some research on during my time at Xavier University while working on my MBA. I have found some interesting articles from law reviews and professional journals on the topic and have compiled them into a short (8 page + cover page) report on the topic. The body of law is primarily built around the Model Business Corporation Act (MBCA) passed by Congress, with various states passing their own laws that take the MBCA even farther. Depending on what state the closely-held corporation is domiciled in will determine the exact remedies to minority shareholder oppression and consequences for director/manager malfeasance.

One area where the statute is not exactly clear, especially from state to state, is in defining exactly what constitutes “oppressive behavior” or “oppression” in general. The various state legislatures have left it up to the courts to decide this on a case-by-case basis. Thus, it is still in the best interest of each organization to settle these matters between the owners without becoming litigious. Being litigious serves no one well except the attorneys that get to represent each side.

The following link is to my entire report that was compiled in November 2006. The file is in Microsoft Word, please right-click on the link and select save as to download this to your desktop for better viewing. In the future I will try to upload more of these documents in Adobe format for easier downloading and viewing. I apologize for any inconvenience. If you have trouble downloading or viewing this document, please email me at allthingsfinancial@yahoo.com

Here is the full report with explanation of the law, recourse or remedy, and citations and references for further reading or research that you might want to do:

Minority Shareholder’s Rights in a Closely Held Corporation

In the event you ever face such a situation, whether you are being accused of director malfeasance or oppression against another owner or feel that you have been oppressed yourself, it is HIGHLY recommended that you seek legal counsel. This blog entry in no way is to be considered an offering of legal advice. Your own unique situation should be carefully reviewed and considered by a licensed, practicing attorney in your respective state. This is merely a review of the topic from an academic, historical research viewpoint.

As always, your feedback is welcome…

Important news that is coming out this week:

6/25/07: Existing Home Sales (volume) reported by the National Association of Realtors(R).

6/26/07: New Home Sales reported by the U.S. Department of Commerce

Both of these are reported at 10:00am EST on their respective days.

Why are the above reported economic data important?

The housing industry has been getting a lot more attention in the latter part of 2006 and first half of 2007 as some parts of the country continually report weaker sales volumes and prices. Although there have not been signs of an entire industry collapsing, a.k.a. “The Bubble” bursting, the slowdown does cause concern if it continues over multiple quarters. This is because more and more homeowners have come to rely on their homes’ value to borrow against for purchases of new cars, take out loans for home improvement, paying off other forms of debt such as revolving (credit card), or to finance other big purchases such as boats, vacations, or to send Jr. to college. Of course, if the homes are decreasing in perceived market value - primarily through an increase in supply of homes on the market, this can create a domino effect of those same consumers not purchasing as much and therefore affecting other areas of the economy (such as consumer confidence, etc).

My personal prediction or expectations of these upcoming reports and their affect on the stock market in the coming week:

I fully expect Existing Home Sales to be on par with expectations and that this factor will not surprise the market. Seasonally adjusted sales should be in line with expectations because mortgage rates have remained stable over the past month.

New home sales may fall short of expectations and I think you would see a brief dip in most homebuilder stocks as a result. My experience and observations here in the Cincinnati & Dayton, Ohio real estate markets the past few months leads me to believe builders are having a hard time unloading newly constructed, completed, vacant houses right now. This belief is based on a few things:

1) I have seen increased incentives offered by builders to Realtors and buyers to sell “spec” homes, or homes that were built purely with the intent to sell upon completion and not to be used as model homes. Many homebuilders are throwing bonuses in the form of increased commission to Realtors or even offering cruises and trips to buyers or agents that refer homebuyers to them. Buyers are also receiving an increasing amount of “upgrades” in their new homes… things that they once had to pay extra for are now being advertised as included or “FREE” when they buy a new home through the builder… preferably one that is already built!

2) I have seen an increase in the number of builder representatives coming into the local Realtor offices to drop off sales literature, i.e. flyers, business cards, and floor plans on models, as well as bringing food, candy and pens with them. This signals that these builder representatives are not having many “walk-ins” in their Model Homes throughout their various subdivisions as they are spending more time developing relationships with local agents.

In addition to increased visits from builder representatives, there seems to be an increased number of mass-emails being sent out by builders to the entire local area Realtor membership base (through the contact list on the Multiple Listing Service) with attachments to these emails containing long lists of inventory available and their respective prices and sales incentives.

3) Finally, I visited the annual Cincinnati Homearama Tour of Homes Luxury Edition (in Montgomery, Ohio) on 6/12. This annual event is held to showcase new luxury homes by various builders as well as demonstrate the numerous products found in the homes. Normally these luxurious homes are already sold when you walk through them. This year I can only think of 1 or 2 out of the 10 homes in the showcase that were already sold. The remaining homes were still being marketed by local Realtors on behalf of the builders.

Overall thoughts on the stock market this week:

I fully expect that the major stock market indices (The Dow Jones Industrial Average - DJIA, the S&P 500, etc) will finish the week lower as investors, hedge funds, mutual funds, etc look to sell some equities and lock in some profits to close out the first half of this year. The Dow and the NASDAQ reached new record levels during the first half of 2007 and every portfolio manager that made a decent return will want to lock in those returns (converting them from paper gains to realized gains) in order to use those results in their marketing efforts to attract new investors to their funds during the second half of 2007.

Some smaller individual investors may want to lock in some returns and cash out some money from their investment accounts for the upcoming July 4th holiday, perhaps to pay for a vacation or to use on some home improvement project they have underway this summer.

Here’s looking forward to the week ahead! As always, your feedback and comments are welcome…

It seems there are little bits of economic news released about the economy every single week, and those announcements affect the stock market in varying degrees depending upon the importance of the data being released.

For instance, the unemployment rate is more likely to help or hurt stocks than say auto or truck sales in any given month. Since different economic indicators are released each month I thought it would be important to highlight some of these factors and how they might affect your investments.

Thus, we begin yet another new series of blog posts. I hope to post, at least on a somewhat frequent basis, a blog entitled “The Week Ahead” looking exclusively at the economic factors affecting the stock market. This blog will not be posted EVERY week as some weeks there are just not any significant pieces of economic data being released.

By the way, the monthly unemployment rate is announced by the U.S. Department of Labor, Bureau of Labor Statistics, on the first Friday of every month at 8:30am EST. This is one hour before the major stock exchanges open and should be considered required viewing/listening/reading for all investors. If you truly care about your investments and like to actively manage them to maximize your returns you will make sure you know the trend over the past few months to a year and that you pay attention that Friday when this data is released.

Now I mentioned that new car and truck sales are not as important; this would of course change entirely if you were heavily invested in Ford, GM, Toyota or any company that is involved in the manufacturing of cars and trucks. But for those of us that believe in a diversified portfolio, this factor would not be AS IMPORTANT as the unemployment rate. Oh, and just to be fair to the automakers, this data is released by each automaker that is publicly traded and usually done so on a monthly basis. Normally within the first 3 days of the month.

Look forward to seeing what The Week Ahead has in store for us! Both literally and in the Blog sense! As always your comments are welcome…